Checks and Balances

Power tends to corrupt, and absolute power corrupts absolutely.

Lord Acton

I was born in Canada and came to the US between my sophomore and junior year in high school. One of my first courses in my newly adopted country was high school civics. I learned with a newcomer’s sense of awe about the three branches of government and their important role in each checking the power of the other. It is highly attributed that this system of checks and balances is the genius of the America.

In the intervening years since those wide-eyed high school years I have been a casual observer of the reality that power and money are self preserving. The more you have of each the more you tighten the circle to protect and increase your lot. The fiasco on wall street is evidence of what happens when the self-reinforcing power/money loop runs exponentially out of control.

If there is any hope of reforming this mess, and I have no expectation that it will be reformed, it would seem that some sort of system of checks and balances will have to be devised. Increased (and effective) regulation might help with some of the “checks” that are needed. But are there “balances” that have yet to be devised? Does the final dissolution of trust by Bernard Madoff mean that investors will demand enough clarity and transparency to balance the unhealthy tendencies of money grubbing?

I have never been a strong advocate of regulation but it it seems to me that a more robust system of checks and balances is needed in our financial systems. The “checks” are somewhat obvious (i.e. regulation). The “balances” are yet to be determined.

Similar Posts

  • What is the purpose of an economy anyway?

    I heard a reporter on a recent Economist podcast say that, in light of the growing UK economy, creating jobs is a good thing.

    It seems to me that creating jobs is not only a good thing, creating jobs is the thing. What other purpose is there for an economy?

    Here’s what I mean. An ‘economy’ is kind of a meta-thing that emerges whenever two or more people get together and decide that working together to meet everybody’s needs is more efficient than everyone trying to each meet 100% of their own needs (like, say, some kind of off-the-grid survivalist). Economies emerge in all kinds of places: prison economies, school-yard economies, national economies, global economies.

  • Contentment

    There are two ways to get enough: one is to continue to accumulate more and more. The other is to desire less.

    — G. K Chesterton

    When Linda and I returned from our stint in London, we landed in New Jersey. Within a few weeks of our US re-entry, and for reasons that still escape us, we bought a beautiful, 2,400 square foot house with a large basement on the north side of Princeton. Despite the delightful, well-groomed neighborhood, we quickly began to discover the folly of our ways. The sweeping windows that let in so much light in the spring became a greenhouse in the heat of summer. It seemed cavernous to heat and cool. Finding enough furniture to fill all the rooms took the better part of a year. …

  • Embrace It!

    I love it when I meet people who understand winter, as in the only way to thrive during winter is to take it head on, get out in it. Dress warm and get outside. If you are cold, dress warmer, get moving.

    — Jeff Smith, editor, Traverse, Northern Michigan’s Magazine

    From A Cross Country Ski Tale

    I’m a northern girl. I was born and raised in an environment whose seasons were punctuated by the first frost and the spring thaw … and the highlight of the year was the day the ice broke on the river.

    The secret to happiness in these “harsh” environments is to meet them head on. Dress warm and get outside. Do not let the weather control your emotions or your happiness. If you are cold, dress warmer, get moving.

    But isn’t life itself a harsh environment? Life is hard. The secret to happiness is the same. Embrace it. Meet it head on. Get out in it. Dress warm. If you are cold, dress warmer, get moving.

  • “The Market” vs “The Economy”

    With all the volatility in the stock market lately it is a good time to remind ourselves that “the market” is not the same as “the economy.” The best that I can tell — at least as of the last few years — “the market” has contracted to a relatively small group of:

    • professional traders
    • automated computer programs
    • institutional investors
    • hedge fund managers

    This tight-knit circle trades amongst itself with very little relevance to what we think of as “the economy.” In contrast to this closed group, the economy is the vast sum of the creation and delivery of the goods and services we want and need.

    It seems to me that the Dow Jones Industrial Average and S&P 500 bears little connection to these things these days.

    Don’t be afraid. Now is the time to be bold. If you don’t like the economy, let’s go out and make one of our own.

  • Mortgage Debacle

    Gretchen Morgensen has written an insightful article in the Sunday Business Section of the New York Times. After the heartbreaking introduction of a homeowner in New Jersey who would like more than anything to keep her home, Gretchen offers the following insight:

    Lenders, government officials and loan servicers, who take in borrowers’ monthly mortgage payments, contend that troubled borrowers everywhere are being helped to stay in their homes by those overseeing their loans. But neither data nor anecdotal evidence supports this view. A recent survey of 16 top subprime loan servicers by Moody’s Investors Service found that for the first six months of 2007, an average of only 1 percent of loans experiencing an interest rate adjustment, or reset, had been modified.

    A few minutes of logical thought would lead one to assume that lowering the interest rate of troubled loans so that the homeowner can continue to make payments and keep the house would be the best result for all concerned. …

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.